Shire's $4B NPS buyout rumor grows legs with latest chatter

A questionable Friday rumor has evolved into a market-moving clamor, as London's Times reports that Shire ($SHPG) has locked down a $5 billion credit facility and intends to make a bid for specialty drugmaker NPS Pharma ($NPSP).

Citing "insiders," the Times reports that Shire has already been rebuffed once by NPS, which makes a costly rare disease treatment, but that former ViroPharm CSO and current NPS board member Colin Broom is working to broker new talks between the two. (Shire traded $4.2 billion for ViroPharm last year, part of the drugmaker's efforts to expand its rare-disease portfolio.)

The Financial Times first reported rumors of the deal on Friday, citing "usually well-informed sources" that Shire was in the early stages of making a $4 billion approach to NPS. That story, despite sending NPS' shares up about 24%, was largely met with skepticism among analysts. The latest report sent the company's shares up about 18% in early trading Monday.

Shire, for its part, said in an email that it does not comment on rumor or speculation.

An overture toward NPS, if true, would make sense for Shire on two levels. For one, CEO Flemming Ornskov has repeatedly looked to M&A to grow the drugmaker's pipeline, and NPS' banner product, the orphan drug Gattex, would fit in alongside Shire's Firazyr franchise and the stable of rare-disease treatments it picked up in the ViroPharm deal.

Furthermore, a sizable takeout could ballast Shire's efforts to ward off would-be acquirers of its own. Thanks to its growing pipeline and the tax benefits tied to its Irish homestead, Shire has become a rumored target for larger drugmakers, and the company reportedly rebuffed a takeover offer from Allergan ($AGN) earlier this year. Taking the plunge on a multibillion-dollar deal could make the company unattainable to its bigger rivals.

And Shire's latest acquisitions are unlikely to do that. In May, the company inked a deal to trade $260 million in cash for Lumena Pharmaceuticals and its stable of treatments for rare liver diseases, and it's on the line to buy Australia's Fibrotech for $75 million upfront and a string of undisclosed milestones.

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